Wednesday’s Vital Data: Amgen, American Airlines and Apple

Amgen, American Airlines and Apple stock are all in the spotlight today

The topsy-turvy ride for stock traders continues this morning with U.S. stock futures pointing toward a sizeable down gap at the open. Yesterday’s gains are being completely unwound.

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Heading into the open, futures on the Dow Jones Industrial Average are down 1.46%, and S&P 500 futures are lower by 1.42%. Nasdaq-100 futures have lost 1.57%.

In the options pits, call volume spiked sharply yesterday underlying the excitement surrounding the market rally. Specifically, about 19.9 million calls and 17.5 million puts changed hands on the session.

The enthusiasm was felt at the CBOE as well, with the single-session equity put/call volume ratio falling to 0.66. Meanwhile, the 10-day moving average held its ground at 0.74. Based on the wickedness of today’s open, however, I suspect both metrics to end with bearish readings today.

Options traders came after calls throughout the session, boosting volumes in Amgen (NYSE:AMGN), American Airlines Group (NYSE:AAL) and Apple (NASDAQ:AAPL).

Let’s take a closer look:

Amgen (AMGN)

The direction of Amgen shares reversed in a big way this week after the biotech behemoth won a patent dispute against Novartis (NYSE:NVS). Over the past three sessions, AMGN stock has rocketed 12% higher on massive volume. The rally pushed shares back to last year’s highs, and they now stand a whisper from breaking out to record levels.

In the short run, AMGN is extended and deserving of a breather. Consolidation or a pullback will allow its moving averages to catch-up and make for a more sustainable uptrend. That said, any weakness should be viewed as a buying opportunity.

On the options trading front, traders went cuckoo for calls. Activity ballooned to 1,314% of the average daily volume, with 275,296 total contracts traded; 96% of the trading came from call options alone. The catalyst for such a groundswell in call demand is the company’s looming ex-dividend date. Amgen’s next quarterly payment of $1.45 will be paid out to shareholders of record and investors used call options to snatch-up short-term control of the stock to gain access to the payout.

Implied volatility has been falling this week and now sits at 24% or the 29th percentile of its one-year range. Premiums are baking in daily moves of $3.08 or 1.5%, so set your expectations accordingly.

American Airlines (AAL)

The news was light for American Airlines Group, but that didn’t prevent traders from swarming its options. In an otherwise ordinary day, we saw options activity jump to 270% of the average daily volume, with 107,237 total contracts traded. Calls slightly outpaced puts to claim 55% of the session’s sum.

Ever since last month’s earnings took the wind out of its sails, AAL stock has been declining. It has now lost 21% in three weeks and will soon test its 52-week low at $27.02. Of course, weakness isn’t new for AAL. It has been in a cyclical decline for two years and has already lost over 53% of its value. Until we see resistance levels breached, buyers should cast their lines elsewhere. There are much more attractive fish to catch.

Implied volatility remains, tucked near the middle of its 2019 range. It’s at 41% or the 31st percentile, and premiums are pricing in daily moves of 71 cents or 2.6%.

Apple (AAPL)

Apple stock led the charge during Tuesday’s roaring rally in the Nasdaq for one simple reason. It dodged Chinese tariffs for this year’s iPhones. Here’s the skinny if you want all the details.

Before we get too excited over yesterday’s jump, keep in mind the overnight whacking for stocks is taking a bite out of Apple’s gains. The stock is set to open down 2.4%. Time will tell if the positive news is enough to keep AAPL stock aloft while the rest of the market grapples with growing recession concerns.

The post-earnings slide found support at $192.50, so that’s the line in the sand to watch. If broken, this year’s ascent is in a heap of trouble. Until then, ignore the chop and focus on the bigger picture, which still points higher.

On the options trading front, traders favored calls throughout the day. Total activity swelled to 137% of the average daily volume, with 686,707 contracts traded. Calls added 59% to the day’s take.

With uncertainty easing, implied volatility sunk to 29% or the 35th percentile of its one-year range. That means traders are now pricing in daily movement of $3.87 or 1.9%.

As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.